Page 15 - bne_newspaper_September_01_2017

Eastern Europe
September 1, 2017 www.intellinews.com I Page 15
Russian economy ministry tries to crack low productivity ahead of 2018 election
Vadim Dumesh in Paris
Russia's Ministry of Economic Development
is preparing a roadmap for increasing labour productivity, Vedomosti daily reported citing the document.
Low labour productivity is an Achilles’ heel of the Russian economy. According to one World Bank study, Russia’s productivity is about a quarter of that in the US. The Central Bank of Russia has also repeatedly warned that inflationary pressures are caused by the gap between wage and productivity dynamics. Low productivity growth spurs inflation when the economy does grow.
The productivity measures will become part of the economic platform for the re-election of President Vladimir Putin in 2018, Vedomosti said citing unnamed federal sources.
Minister of Economy Maxim Oreshkin, who is emerging as a new intellectual force in the reform planning process, is spearheading the ideas in the plan. Previously, all the running was made by former finance minister and co-head of the presidential council Alexei Kudrin and business ombudsman Boris Titov, who both have alternative plans. The youthful Oreshkin seems to have been singled out by Putin, who in a government shake up last year appointed many new young faces to the Kremlin.
Productivity has long been on the agenda, with the goal of boosting productivity 1.5-fold by
2018 set in Putin’s infamous "May decrees" in 2012. These have also put regional governments under pressure as they contain wage increases they are now struggling to pay for as they were
Minister of Economy Maxim Oreshkin has a plan to boost productivity.
predicated on rising production gains that have failed to appear. The productivity indicator has been shrinking ever since the May decrees were issued, declining by 3.5% in 2012, 0.7% in 2014, and another 2.2% in the post-sanction 2015.
The proposed measures are reportedly divided into two broad directions: one of improving business conditions and monitoring and facilitating competencies on the federal level, and the second of pilot projects for selected companies.
The ministry also proposes a package of tax discounts on investment loans, discounted lease programmes and loans with interest as low as 1% granted by the Fund of Industrial Development (FRP). Six to ten regions will be chosen to participate in the programme.
Pilot regions in 2017 could include Samara, Tulskaya, Tyumen, Permskaya, Bashkortostan and Tatarstan (the latter two home to leading regional oil producers Bashneft and Tatneft).
The authors of the plan reportedly closely consulted the experience of heavy vehicle producer Kamaz that became a domestic success story boosting productivity in January-June 2017 by 37.4% to RUB1.6mn per worker, while cutting the average number of workers by 2.5%.
Increases in labour productivity are expected at 2.9% in 2020, should the measures be adopted. However, the programme's total budget appears to be modest, at just RUB30bn over four years. Experts surveyed by Vedomosti also noted that